IMF ‘praise’ for Pakistan reforms paves way for loan tranche

The International Monetary Fund (IMF) has praised Pakistan’s recent economic performance, as the fifth day of technical negotiations between the two sides concluded with significant progress, according to government sources familiar with the discussions.

The meetings are part of Pakistan’s ongoing engagement under a multi-billion-dollar IMF program aimed at stabilizing its fragile economy. The current review is linked to the release of the next tranche of funding under the Extended Fund Facility (EFF), and the IMF team’s positive signals suggest Pakistan is on track to meet key performance benchmarks.

Sources said Pakistan has met critical IMF targets related to controlling inflation, narrowing the fiscal deficit, and improving the current account balance.

“The exchange of economic data between Pakistan and the IMF has reassured the Fund that Pakistan is on the right track,” one official told reporters.

The IMF also welcomed recent upgrades in Pakistan’s sovereign credit rating by international agencies, which were attributed to improving macroeconomic indicators and policy consistency.

However, economic challenges remain.

The IMF has projected that the government’s 4.2% GDP growth target may be affected by recent flooding, especially in key agricultural regions of Punjab and Khyber Pakhtunkhwa.

As part of its governance reform agenda, the IMF has reiterated its demand for the immediate publication of the Corruption Diagnostic Assessment Report, calling for strict measures to enhance transparency and accountability in public institutions.

The Fund also urged the Finance Ministry to address weaknesses in Pakistan’s budget process. It asked the government to streamline and simplify budget formulation by preparing a reform report by 2026 and implementing improvements ahead of the next fiscal year.

In a significant step toward tax reform, the IMF has directed the Federal Board of Revenue (FBR) to develop and share a strategy to simplify the tax filing system. This strategy is expected to include a review of special tax regimes, withholding tax structures, and a reduction in advance taxes.

A detailed timeline for implementing these reforms must be finalized by May 2026.

In response, the Fund has directed the FBR to provide technical support to the Establishment Division for building and monitoring the system. Under this mechanism, the FBR will be responsible for identifying discrepancies in asset declarations and any government official found guilty of misreporting or concealing assets will face financial penalties and formal investigation.

The IMF’s push for transparency and institutional reforms comes as Pakistan continues to grapple with economic uncertainty, despite recent signs of stabilization.

The country is hoping for a favorable outcome from the ongoing review to unlock the next installment of IMF financing, which is critical for shoring up reserves, maintaining investor confidence, and sustaining external financing needs.